Spotify and Netflix might have to pay a 12 percent tax soon, thanks to this bill

A bill seeking to impose value-added tax (VAT) on digital service providers like Netflix, Spotify and Lazada was just approved by the House Committee on Ways and Means.

This bill, filed by Albay Rep. Joey Salceda, is a substitute bill for several others filed by lawmakers. The measure amends the National Internal Revenue Code of 1997 to include digital transactions among those covered by VAT. 

“Any person who, in the course of trade or business, sells barter exchanges, leases goods or properties—including those in digital or electronic in nature—renders services, including those rendered electronically, and any person who imports goods shall be subject to the VAT,” the amendment reads.

Digital service providers are defined as entities who provide “a digital service or goods to a buyer, through operating an online platform for purposes of buying and selling of goods or services or by making transactions for the provision of digital services on behalf of any person.” 

The following are also deemed digital service providers:

• A platform provider for promotion that uses the internet to deliver marketing messages to attract buyers;
• A host of online auctions conducted through the internet, where the seller sells the product or service to the person who bids the highest price;
• A supplier of digital services to a buyer in exchange for a regular subscription fee over the usage of the said product or service;
• A supplier of electronic and online services that can be delivered through information technology structure such as the internet, or
• A third party that acts as a conduit for goods or services offered by a supplier to a buyer and receives commission therefore.

These services are now subject to 12 percent tax, derived from the sale or exchange of goods including those done electronically. Non-resident digital service providers are responsible for collecting and remitting the VAT on the transactions on their platform. 

AAMBIS-Owa Partylist Rep. and Vice-Chairperson of the Ways and Means Committee Sharon Garin clarified that the bill will not be targeting small businesses online. 

“Ang nangyayari kasi ngayon, ‘pag Netflix—o anumang company mag-subscribe ka dun—babayad ka dun sa foreign company pero walang tax, hindi subject to tax dito sa Pilipinas. Pero should Netflix be Filipino or any other company na nagsu-subcribe ka, nagbabayad sigurado ng value added tax at income tax kasi dito [naka-base]. So it’s unfair to those that are operating registered here,” Garin explained. 

Finance Assistant Secretary Daki Napao added that the government will earn P10 billion from this measure. From this amount, P9 billion will come from foreign businesses and P1 billion will come from local companies.

Header photo by Kon Karampelas on Unsplash

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